Cooling yields hit the greenback

What you need to take care of on Friday, June 17:

Central banks spurred panic, but the American dollar could not take advantage of the panic scenario, ending the day with losses against most major rivals.

The Switzerland National Bank surprised markets with an unexpected 50 bps hike, while the Bank of England moved as planned and made its fifth consecutive 25 bps hike. Two things we learned from this. On the one hand, the Fed is far more aggressive than any other central bank. On the other, global policymakers are much more scared about the economic situation than what they let see.

Stocks resumed their declines, with Wall Street plummeting to fresh 2022 lows. The DJIA and the S&P 500 traded at last levels seen in January 2021. The FTSE 100 also plummeted as the BOE’s decision fell short of the market’s expectations. Recession fears are behind stocks’ collapse.

Demand for government bonds sent yields to the lower end of their weekly range, which in turn clamped demand for the greenback. The yield on the 10-year Treasury note currently stands at around 3.30% after flirting with 3.50% earlier in the day. The dollar’s weakness may well be temporal if the demand for safety continues.

The EUR/USD pair trades around 1.0570, while GBP/USD hovers around 1.2350. The AUD/USD pair surged to 0.7070, holding nearby, while the USD/CAD changes hands at 1.2920. Save-haven currencies were firmly up against the dollar, with USD/CHF down roughly 300 pips, now trading in the 0.9630 region. Ahead of the Bank of Japan monetary policy decision, the USD/JPY battles around 132.00.

Gold surged to a fresh 3-day high of $1,852.74 a troy ounce, nearby holding ahead of the Asian opening, while crude oil prices recovered some ground. WTI is now trading at $117.70 a barrel.


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